Tupelo, Mississippi-based BancorpSouth Bank has agreed to purchase Houston-based Cadence Bank in an all-stock deal that values the combined company at more than $6 billion, the two financial institutions announced Monday.
Under the terms of the merger agreement, Cadence shareholders will receive 0.70 BancorpSouth shares for each Cadence share they own, valuing Cadence at $2.81 billion, according to MarketWatch. Cadence shareholders will also receive $1.25 per share following the merger’s closing.
The combination will create a $44 billion-asset financial institution that will operate under the Cadence name. The deal, which is still subject to regulatory approval, is expected to close in the fourth quarter.
After the merger, BancorpSouth Bank CEO Dan Rollins will become chairman and CEO of the combined entity, while Cadence CEO Paul Murphy will serve as executive vice chairman.
The combined bank will operate headquarters in both Tupelo, Mississippi, and Houston, while its primary operations centers will continue to be located in Tupelo and Birmingham, Alabama.
The deal would create a bank with a footprint spanning from Texas to Florida, with little branch overlap, Rollins said Monday on a call with analysts.
"Even though a lot of the markets look and feel similar, it's really a market expansion," he said.
The merger will result in significant regulatory and technology cost savings, Murphy said.
"Rates are low and the benefits of spreading technology over a bigger base, and the benefits of spreading the cost of regulatory over a bigger base are compelling," Murphy said. "The cost-saves are a safe move for us to generate nice earnings growth for our shareholders and that's a key driver of a transaction like this."
Rollins said the merged entity would create "an acquirer of choice," adding he expects the firm would continue to look for more opportunities to grow in Texas and beyond.
"I don't think we're going to change our stripes. We want to continue to be opportunistic ... wherever those opportunities present themselves," Rollins said. "Texas, obviously, is a target-rich environment. And we both would like to be much larger in the Dallas and Austin markets than we are today, but that doesn’t mean that’s the only place we’re looking."
"We’re in nine states now and the more we can do to look at future opportunities that are expense-saves in adjacent markets, that's a big plus for us," Murphy said.
BancorpSouth said it expects to have $125 million in merger-related costs.
The bank said it plans to save $78 million in annual non-interest expenses as a result of the merger. The bank plans to achieve 75% of its merger-related cost savings by 2022, and 100% in 2023.